Correlation Between YieldMax META and Dow Jones

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Can any of the company-specific risk be diversified away by investing in both YieldMax META and Dow Jones at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining YieldMax META and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between YieldMax META Option and Dow Jones Industrial, you can compare the effects of market volatilities on YieldMax META and Dow Jones and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in YieldMax META with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of YieldMax META and Dow Jones.

Diversification Opportunities for YieldMax META and Dow Jones

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between YieldMax and Dow is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding YieldMax META Option and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and YieldMax META is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on YieldMax META Option are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of YieldMax META i.e., YieldMax META and Dow Jones go up and down completely randomly.
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Pair Corralation between YieldMax META and Dow Jones

Considering the 90-day investment horizon YieldMax META Option is expected to under-perform the Dow Jones. In addition to that, YieldMax META is 2.03 times more volatile than Dow Jones Industrial. It trades about -0.05 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.04 per unit of volatility. If you would invest  4,257,373  in Dow Jones Industrial on December 28, 2024 and sell it today you would lose (98,983) from holding Dow Jones Industrial or give up 2.32% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

YieldMax META Option  vs.  Dow Jones Industrial

 Performance 
       Timeline  

YieldMax META and Dow Jones Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with YieldMax META and Dow Jones

The main advantage of trading using opposite YieldMax META and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YieldMax META position performs unexpectedly, Dow Jones can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dow Jones will offset losses from the drop in Dow Jones' long position.
The idea behind YieldMax META Option and Dow Jones Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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